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Different regulations apply to different mortgages and there is no one-size-fit-all set of regulations that govern all kinds of mortgages. For example there are mortgages for HUD or FHA homes and these are federally insured. There are also private mortgages offered by different banks which may or may not be insured depending on a buyer's down payment. These mortgages range from prime (for the most qualified home buyers) to sub-prime mortgages for those with less than stellar credit. Therefore, the best place to get the set of rules that will affect late payments for any kind of mortgage is the security instrument itself, the actual loan agreement. In other words, read the fine print on your mortgage documents. That having been said, there are mortgage regulations about late mortgage payments for lenders and these serve as guidelines for banks when writing mortgage agreements. This article will focus on a discussion of these laws as well as the specific example of mortgage regulations about late mortgage payments as they apply to HUD-insured mortgages.
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HUD Housing Regulations
Regulations for HUD-insured homes allow for the servicer of the loan to charge a late payment fee 15 days after the due date, in other words not earlier than the 16th day following the due date. For example, if the due date on your loan is the 1st of the month, you are delinquent by the 2nd and a late charge can be assessed by the 17th if your payment has not been received. The loan servicer can usually charge up to 4 percent of the monthly payment as a late fee. Late payments are calculated separately for each month and monthly payments cannot be lumped together. Late payments can also be waived as it is at the discretion of the servicer whether or not to charge a fee in the first place. The borrower should especially have a late fee waived if the payment was late due to no fault situation.
Loans that are 30 days past due are in default and could be subject to foreclosure proceedings. Generally these start after 90 days past due. The length of the foreclosure process from first public action to repossession is determined by state law.
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Truth in Lending Act
The Truth in Lending Act (TILA) became law in 1968 as part of a suit of consumer protection laws and is enforced by the FDIC. It requires lenders to include certain mortgage disclosures in loan agreements. These disclosures pertain to exact costs associated with the loan including annual percentage rate, finance charges, closing costs, total amount borrowed, total payments expected over the life of the loan and the purchase price of the property. While the law does not specifically mention late payments, most lenders keeping in principle with full disclosure of all facts associated with the amount you are about to borrow, will also include details of late payment charges. If this information is not included in your mortgage document, you need to ask for it. Again, read the fine print.
Image Credit: Home Loans UK
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Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) enforced by the Federal Trade Commission (FTC) is a consumer protection law designed to ensure the privacy, safety and accuracy of your credit information reported to consumer credit reporting agencies by your lender. With respect to mortgage payments, your lender or loan servicer will report the activity on your loan each month, be they payments, late payments and balance on the loan. So if you are late, this information will make it to your consumer credit report and may affect credit decisions made by other lenders, insurers, and even employers. Usually late payments are reported only after you have been 30 days late. You have certain rights under the FCRA such as nobody can request information without your consent and you are entitled to have erroneous information on your credit report corrected.
Image Credit: Gift House / Wikimedia Commons
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Fair Debt Collection Act
When you are behind on your mortgage payments, your account may be referred to a debt collector. In some cases the debt collector is another department within the bank and in others, it is an outside debt collector. The Fair Debt Collection Act (FDCA), also enforced by the FTC, regulates how debt collectors conduct their activities and gives consumers certain rights. These include, the right to tell the debt collector to stop contacting you, the right to receive accurate information about the amount you owe, and the right to have payments you make applied to the particular debt that you indicate. Debt collectors are also prohibited from certain behaviors such as harassment, making false statements, and unfair practices.
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The Importance of State Law
While the laws and regulations mentioned so far are federal, bear in mind that your state may have other laws and mortgage regulations about late mortgage payments that may apply. If you need help with this, it is important that you contact your state housing agency talk or to your real estate lawyer, or a qualified real estate or mortgage professional who represents your interests.